You may have heard of selling without a real estate professional, but have you ever heard of buying without one? If not, there’s a good reason.
The home purchase process is a complex one with a great deal of paperwork and many moving parts involved. Well-qualified, buyer-oriented real estate agents possess a wealth of market knowledge and an extensive professional network that can make a home purchase proceed smoothly and in a timely manner.
However, some buyers contemplate going it alone, especially if they have some legal knowledge or experience with a prior real estate transaction. Buying a home without a realtor can be far more complicated than many buyers realize. Buyers may find themselves struggling with the extensive time commitment, paper shuffling, and decision-making involved.
How hard is it to buy a house without a Realtor?
Prior to the 1990s, buyer agency and buyer representation were relatively rare in the United States and Canada. At that time, a potential buyer would go to a real estate broker and ask about their listings. The buyer would generally be shown listings represented by that brokerage or could seek out information directly from the listing agent representing a home for sale.
As technology developed throughout the 1990s and early 2000s, online multiple listing services (MLSs) and real estate portals like Zillow and Realtor.com began to become more popular. Now, instead of finding only the listings with signs in the yard or those represented by an individual broker, buyers could choose from among all of the publicly available listings in a real estate market.
With all that information, real estate transactions became more complex. In addition, the 2008 mortgage meltdown made real estate deals and negotiation processes more consequential as well. Buyers wanted to be better represented in the transaction and, with bargaining power on their side, they wanted tougher negotiators on their side of the table. Thus, buyers were eager to learn how to find a real estate agent and buyer representation became far more common.
According to the National Association of Realtors’ 2021 Buyer and Seller Report, 87% of buyers used an agent during their buying process. This represents a steady increase from 69% in 2001. Most of those who don’t use a buyer agent are probably buying from family or friends, buying from a For Sale By Owner (FSBO) seller, are experienced real estate investors, or are having their transaction facilitated through a real estate attorney.
Who pays for a buyer’s real estate agent?
When it comes to who pays the real estate agent, in most cases, the seller includes a total commission percentage in their seller representation agreement. Although the amount can vary depending on the market and individual circumstances, it usually falls between five and six percent of the purchase price. That commission is then split more or less evenly between the listing agent and the buyer agent.
In some rare cases, a seller will refuse to pay commissions. This is especially common with FSBOs and in some new construction transactions. In that case, you can negotiate to pay a fee or commission to your real estate buyer agent or you can choose to redirect your search toward a property with a seller who will pay the commission on your behalf.
What documents do I need when buying a house without a Realtor?
If you’re buying without a Realtor you’ll have to wrangle the extensive paperwork required, manage your own negotiations, and dot every I and cross every T along the way. For even the most basic transactions, you’ll require all of the following:
You’ll need information about current listings in your area in order to begin your home search. You’ll be able to find a good selection on the online real estate portals where you can customize your search parameters to narrow down the results. From there, you’ll need to contact the listing agent directly if you want to schedule an appointment to see an individual property.
As part of your research, you’ll want to put together a list of comparable homes that have recently sold in the same market as the home you are interested in. This can be difficult, especially if there haven’t been many sales in that neighborhood over the previous few months or if there is a nearby neighborhood with markedly different home values. You’ll need to consult publicly available records to find out what the final sale price was, since it may be different from the listing price.
In some cases, you can’t view a property without a mortgage pre-approval. In most cases, a subsequent offer won’t be considered without one, either. You’ll need to identify a lender and submit documentation to establish your employment status, income, and other financial information. Then, you’ll need to accompany your offer with a pre-approval letter from the lender for the amount of your offer.
As part of the due diligence process, you’ll receive a disclosure statement from the seller providing information about any known negative facts about the property that could affect its value. Seller disclosures vary widely by state, so you’ll need to research disclosure laws for your area to determine how much information you can expect from your seller.
Once you’ve reviewed the information and decided to make an offer, you’ll need to put together a sales contract to outline the terms of the purchase agreement. Here you’ll define the amount you’ll pay, how much you’ll finance, the type of loan product, and the timeline for the purchase, contingencies, inspections, and appraisal, as well as the specifics of the closing, including who will conduct the closing and where they are located.
In the sales contract, you’ll also record all of the conveyances of the property. You’ll generally want to include what finishes, appliances, and other items will come along with the property. Even if you are able to agree on a price for the home, conveyances can make a big difference in the value of the property and the amount of money you’ll have to pay to get it up and running once you move in.
For example, if you don’t include appliances in your sales contract, you could find yourself having to purchase all of the kitchen appliances as well as a washer and dryer when you first move in. In fact, this is quite common in some markets, so it’s important to make sure everything that you want to have included is put in writing. By contrast, if you were planning to replace all of the appliances, you might want to specify that the existing appliances be removed and disposed of before closing day.
Many people wonder, “what does contingent mean?” Contingencies accompany your sales contract and outline the various deadlines attached to the escrow or contract period. These include deadlines for the home inspection, appraisal, financing, and other steps along the way to the purchase. You’ll need to keep up with each contingency and your response to it so that they can be satisfied before the closing on the property.
Home inspection report and response
One of the most important contingencies is the home inspection that you’ll conduct within a week or so of the ratification of your sales contract and associated contingencies. You’ll need to find a reliable home inspector, accompany the inspector to the inspection, then decipher the home inspection report. This extensive document will provide information about the home’s systems, appliances, and overall condition so that you can make an informed decision about your purchase. To learn more about who pays for a home inspection, we’ve written about this topic in detail.
Once you receive the report, you’ll need to respond to it in order to satisfy the contingency. Your response could take any of the following forms:
- No requests for repairs: Contingency satisfied
- Requests for repairs: This would be accompanied by a list of the repairs you’re requesting. The contingency will have outlined a schedule for responses and further negotiations of these repair items. It is important for you to adhere to this schedule and respond in a timely manner to the seller's response.
If the seller agrees to the repairs, the contingency is satisfied. If not, you can continue to negotiate or walk away from the purchase under the terms of the contingency.
- Request for additional funds to make the repairs yourself: This will be accompanied by a dollar amount requested which can subsequently be negotiated with the seller. If the seller agrees to provide the funds, the contingency is satisfied. If not, you can continue to negotiate or walk away from the purchase under the terms of the contingency.
In some cases, the overall inspection report will identify one or more items that need further inspection by a specialist. In that case, you’ll need to request additional time from the seller as well as access to the home for another inspection. You’ll also need to define the timeframe for responses and further negotiation, just as you did for the general report.
What is a home appraisal? Assuming you are not paying cash and are financing the property through a lender, there will be an appraisal to determine the home’s fair market value. At that point, the lender will provide you with the results of the appraisal. To learn more, read our post about appraisal vs market value.
If the home appraises for the amount you’ve agreed to pay or more, the transaction will continue and the appraisal contingency will be released. If the home appraises for less than you’ve agreed to pay, a new negotiation will take place. At this point, you have the following options:
- Agree to pay the difference out of pocket in addition to your down payment
- Ask the home sellers to pay the difference by reducing the purchase price
- Ask the home sellers to split the difference between you
If there are specific errors on the appraisal report, such as an erroneous square footage number or a mistake in the number of bedrooms or bathrooms, you may be able to contest its findings and have the home reappraised. You will have to check the appraisal yourself and make that request, however, since you won’t be working with an agent.
You’ll need to work directly with a closing officer either at an attorney’s office or at a title company to get ready for the closing. Once all contingencies have been satisfied and your lender has given you the “clear to close,” you’ll schedule a closing where you’ll sign all of the relevant documents and receive the keys to the property, garage door openers, gate or key fobs, and any other information related to the property.
As you can tell, buying without a realtor is a complex process so if you are questioning when you should contact a realtor to buy a house, the answer is right away. Unless you have a compelling reason for doing so, it doesn't make much sense to undertake this responsibility on your own.
Don’t go it alone when dealing with a transaction where so much is at stake – your happiness, your money, and your time. Trust Dwellful to connect you with the right first time home buyer real estate agent in your market. Our agent finder will help you find a buyer’s agent who is experienced and knowledgeable, so they can guide you through every step of the process and help you get the best deal on a timeline that works for you and your family.